The Daily Telegraph

Pound slumps to post-covid low amid Sturgeon threats

- By James Warrington

STERLING slumped to its lowest level against the dollar since the pandemic as Nicola Sturgeon’s renewed independen­ce threats compounded recession fears.

The pound slid as much as 1.5pc against the dollar to $1.1992 yesterday, its lowest since March 2020. It took the currency’s total losses so far this year to more than 11pc.

Against the euro, sterling dropped 1pc to 86.62p – its weakest since July last year. It came after the Scottish First Minister said she would outline plans for a new independen­ce referendum.

Ms Sturgeon renewed her vow to hold a rerun of the 2014 vote and suggested the Scottish Government could do so without securing permission from Westminste­r.

Simon Harvey, head of FX analysis at Monex Europe, said: “If I were to isolate the [pound] move lower down to one event, I’d most probably say that the Scottish independen­ce risk was the straw that broke the camel’s back.

“The impact of the announceme­nt by Nicola Sturgeon was inflated by the sheer pressure the pound is under from a multitude of factors.”

Sterling has come under pressure from a stronger dollar after surging US inflation fuelled expectatio­ns of more aggressive monetary policy tightening by the Federal Reserve. Last week’s consumer prices index showed US inflation unexpected­ly surged to a 40-year high of 8.6pc in May.

The producer prices index, which measures inflation before it reaches consumers, jumped 10.8pc in the same month, according to data released yesterday.

While the rise marked a slight slowdown from April’s growth, it suggested recent price surges are likely to persist. Strategist­s at Goldman Sachs have forecast the Fed could raise interest rates by 75 basis points at this week’s meeting – ahead of market expectatio­ns of a 50 basispoint increase.

By contrast, markets are expecting a more cautious approach by the Bank of England after the latest UK data showed a surprise fall in GDP in April.

Andrew Bailey, the Governor, will be tasked with balancing efforts to curb inflation with the risk of tipping Britain into a recession.

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